Tracking weak global markets and euro's fall to a two-month low, the Indian
rupee on Thursday cut short two-day rally losing 16 paise to settle at 54.36 against the US dollar on heavy demand for the American currency from banks and importers.
While the US dollar continued to steam ahead, buoyed by jitters over Europe's debt crisis, sustained capital inflows worth $50 million from FIIs restricted the rupee's fall to some extent, said forex dealers.
At the Interbank Foreign Exchange (Forex) market, the domestic currency resumed sharply lower at 54.55 a dollar from overnight close of 54.20. It immediately dropped further to a low of 54.67 on heavy dollar demand from importers and early steep fall in local stocks.
Later, rupee recovered on smart rebound in domestic stock market to a touch a high of 54.31 before finishing at 54.36 - still showing a fall of 16 paise or 0.30 per cent. In last two days, rupee had surged by 41 paise or 0.75 per cent.
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